2015 (2) TMI 634 - HC - Income Tax

Disallowance of interest on money borrowed for purchase and installation of plant and machinery - ITAT deleted disallowance - Held that - The question answered against the revenue, at the time of admission of the appeal by relying upon a judgment Deputy Commissioner of Income Tax, Ahmedabad Vs. Core Health Care Ltd. (2008 (2) TMI 8 - SUPREME COURT OF INDIA), therefore, does not require any further consideration. - Decided in favour of assessee. Addition on account of excise duty on closing stock - application of section 145 A - Assessing Officer included excise duty while computing opening and closing stock - ITAT deleted disallowance - Held that - A perusal of Section 145(A) of the Act and the clarification relating to the method of accounting, contained in the circular issued by the Institute of Chartered Accountant, does not enable us to hold that the opinion recorded by the Tribunal is in any manner perverse or arbitrary. The fact that the judgment in M/s Indo Nippon Chemical Industries Limited's case (Supra) relates to modvat credit would make no difference as it is the method of accountancy and the principle affirmed in M/s Indo Nippon Chemical Industries Limited's case (2003 (1) TMI 8 - SUPREME Court) that is relevant. Decided against the revenue. Interest on interest free advances to directors and other parties - ITAT allowed the claim - Held that - Decided in favour of the revenue and against the assessee by setting aside the order passed by the Income Tax Appellate Tribunal and restoring the matter to the Tribunal to adjudicate the matter afresh after taking into consideration the opinion recorded by the Hon'ble Supreme Court in M/s S.A. Builders Ltd's case (2006 (12) TMI 82 - SUPREME COURT ). - Decided against the assessee Interest on excess refund - whether Section 234D of the Act does not apply to the case of the assessee ? - Held that - A bare perusal of Section 234D of the Act, leaves no ambiguity that the assessee is liable to pay interest on excess refund. The opinion recorded by the Tribunal that Section 234D of the Act does not apply to the case of the assessee is incorrect. The assessee does not deny receipt of excess refund and, therefore, is obliged under Section 234D of the Act to pay interest. However, as Section 234D came into force on 01.06.2003 and admittedly does not operate retrospectively, the assessee would be required to pay interest from the date of incorporation of Section 234D i.e. 1.6.2003. Question of law is answered in favour of the revenue by holding that the assessee is liable to pay interest on excess refund from 1.6.2003. - Decided against assessee.

Summary

Issues:
1. Deletion of disallowance on interest for plant and machinery.
2. Deletion of addition on excise duty for closing stock.
3. Interest on interest-free advances.
4. Interest on Section 234D.

Deletion of disallowance on interest for plant and machinery:
The High Court addressed the challenge to orders passed by the Income Tax Appellate Tribunal regarding the deletion of disallowance made on interest for plant and machinery. The Tribunal's decision was based on a judgment of the Supreme Court and was upheld by the High Court, concluding that no further consideration was needed on this matter.

Deletion of addition on excise duty for closing stock:
The issue revolved around the inclusion of excise duty while computing opening and closing stock. The Assessing Officer relied on Section 145(A) of the Income Tax Act, but the CIT(A) deleted the addition based on CBDT circular and Chartered Accountants' guidelines. The Tribunal affirmed this decision, emphasizing the relevance of the method of accountancy and principles set by previous judgments. The High Court upheld the Tribunal's decision, stating that the method of accounting and principles were crucial, regardless of the specific case related to modvat credit.

Interest on interest-free advances:
The matter of interest on interest-free advances to directors and other parties was discussed. The Tribunal's decision was challenged based on a Supreme Court judgment, leading to a remittance of similar cases for reconsideration. The High Court adopted a similar course as in a previous case, setting aside the Tribunal's order and directing a fresh adjudication considering the Supreme Court's opinion.

Interest on Section 234D:
Regarding interest on Section 234D, the dispute centered on the applicability and calculation of interest on excess refund. The High Court clarified that the assessee was liable to pay interest on excess refund as per Section 234D. However, the interest was to be calculated from the date of incorporation of Section 234D and not retrospectively. The court ruled in favor of the revenue on this issue.

In conclusion, the High Court addressed various issues related to income tax appeals, including disallowance on interest, excise duty inclusion, interest on advances, and interest under Section 234D. The judgments were based on legal interpretations, previous decisions, and the specific provisions of the Income Tax Act. The court provided detailed analyses for each issue, ensuring a comprehensive understanding and resolution in accordance with the law.